VC Lab introduces a new type of limited partners known as “Supporters.” This new LP archetype offers a lower minimum to make venture capital accessible for angels, entrepreneurs, and high net worth individuals, and, in exchange, the Supporters help the fund to succeed.
Introducing the Supporter
The Supporter has a target commitment size of $50,000 to a traditional fund or less for alternative vehicles. This commitment is normally called 25% at closing and then the remainder over the life of the fund, making it affordable for most accredited investors interested in the venture capital asset class.
Supporters assist the manager or managers of the fund with various activities and have a reduced set of perks compared to those offered to larger limited partners in exchange for the lower minimum. This model democratizes the venture capital space, inviting a broader spectrum of participants to contribute beyond capital.
Building a venture capital fund is hard, and managers need all the help that they can get. The largest funds in the world have invited entrepreneurs and other strategic individuals to invest below the minimum, and we wanted to formalize this with standards and best practices.
Adeo Ressi, CEO of Decile Group and VC Lab
How do Supporters help?
Supporters commit capital and expertise to the success of a venture capital fund. This provides the opportunity for Supports to make financial returns and to learn about the asset class at the same time.
- Identifying Talent: Supporters play a key role in identifying skilled professionals who can assist the fund manager, thus adding significant value to the management team.
- Referring Investment Opportunities: Supporters leverage their networks to introduce potential investment opportunities to the fund, thereby enriching the portfolio.
- Introducing Limited Partners: Supporters actively seek and recommend prospective limited partners, contributing to the broadening of the fund’s investor base.
To facilitate this, Supporters may engage in several activities:
- Joining a Supporter Mailing List: Supporters are included in a specialized mailing list, which is a hub for sharing critical information about the fund’s needs, market trends, and areas where Supporters can make impactful contributions.
- Attending Semi-Annual Supporter Calls: Supporters are invited to semi-annual calls that focus on discussing the fund’s strategic needs and directions, ensuring that they remain well-informed and aligned with the fund’s goals.
- Supplying Opportunities: Supporters are encouraged to identify and provide relevant opportunities that align with the fund’s focus, such as investment leads, potential hires, or strategic partnerships.
- Hosting Informal Networking Events: By organizing or facilitating networking events, Supporters can bring together industry leaders, potential LPs, and other crucial stakeholders, thus creating a vibrant and resourceful ecosystem around the fund.
- Resharing News and Announcements: Through their social media platforms, Supporters can significantly boost the fund’s visibility by resharing news and announcements, expanding its reach and influence.
Supporters need to be mindful not to distract the fund managers from their primary responsibilities. Their focus should always be on adding value, ensuring that their contributions are both relevant and timely. This careful balance is essential to maintaining a productive and mutually beneficial relationship between Supporters and fund managers.
Who are Supporters?
The Supporter role is particularly suited for individuals like entrepreneurs, angel investors, and high net worth individuals new to venture capital and keen to deepen their understanding. This group often possesses rich industry experience and networks but seeks more intimate knowledge of VC dynamics.
Entrepreneurs as Supporters
Entrepreneurs seek to engage in venture capital to diversify their assets and leverage their industry expertise for financial returns. With their extensive experience in managing and growing businesses, they can introduce talented professionals to the fund.
Example: An entrepreneur from the fintech sector, recognizing the fund’s need for a tech-savvy CFO, connects the fund with a highly skilled finance professional they previously collaborated with. This new addition brings a wealth of experience and innovation to the fund’s financial strategies.
Angel Investors as Supporters
Angel investors engage in venture capital to expand their investment reach and to contribute to groundbreaking projects beyond their direct investments. Their broad network within the startup community positions them well to offer exciting deal flow opportunities to the fund.
Example: An angel investor, aware of a cutting-edge AI startup seeking funding, introduces the venture to the fund. This introduction potentially positions the fund at the forefront of AI innovation, adding a high-potential startup to its portfolio.
High Net Worth Individuals as Supporters
High net worth individuals participate in venture capital as a means to not only diversify their investment portfolio but also to gain insights into emerging market trends. They are uniquely positioned to introduce new potential limited partners to the fund through their elite social and professional networks.
Example: A high net worth individual, well-connected in a network of affluent professionals, organizes an exclusive event where they introduce the fund’s managers to several prospective limited partners. This event results in expanding the fund’s investor base, bringing in fresh capital and diverse viewpoints.
It is important to note that the Supporter can not get too involved in the operations of the fund, or the Supporter may lose their limited liability status. With that said, they can and they are expected to help.
What are the Expectations for Supporters?
Supporters, while integral, should anticipate a different engagement level compared to higher-tier LPs. They may have limited direct access to fund managers and fewer perks like exclusive LP dinners. However, they gain invaluable insights and a sense of partnership through annual or semi-annual meetings with fund managers.
| Supporter | Limited Partner | |
|---|---|---|
| Lower Minimum (i.e. $50,000 USD) | X | |
| Help the Managers | X | |
| Supporter Mailing List | X | |
| Supporter Semi-Annual Assistance Call | X | |
| Quarterly & Annual Reports | X | X |
| Fund Newsletters | X | X |
| General Fund-related Events | X | X |
| Individual Access to the Manager | X | |
| LP Dinners & Premium Events | X | |
| Annual LP Gatherings | X | |
| Co-investment Opportunities | X | |
| Follow-on & SPV Opportunities | X |
How to become a Supporter?
For those intrigued by the Supporter role, the LP Institute offers a training program tailor-made for this new LP archetype. This initiative pairs Supporters with appropriate funds, ensuring a mutually beneficial relationship.
Conclusion
The Supporter represents a pivotal shift in the venture capital ecosystem, fostering inclusivity and active participation. If you are an entrepreneur, angel investor, or a high net worth individual eager to contribute more than capital, the LP Institute awaits your involvement. Embrace this opportunity to shape the future of venture capital from within. Join us as a Supporter and be part of this exciting evolution.